Fast Radius chose to merge with a special purpose vehicle (SPAC), which sells shares to investors before identifying the company to buy. However, investors can redeem their shares after the acquisition objective has been announced.
That’s what happened to Fast Radius, which expected to raise $300-$445 million. More than 90% of SPAC investors returned their shares according to the bankruptcy filing. In the end, the company raised only $106 million.
“Fast Radius completed the transaction with the express intention of raising additional capital to bridge profitability, while the amount raised is expected to be sufficient to fund operations through the end of the year,” the company said in its bankruptcy filing.
After the SPAC merger closed on Feb. 4, shares fell 25% to $7.63. They continued to fall, slipping below $1 a share in April. Fast Radius began looking for a buyer in July, and by October the company appeared to have found one. It was a cash deal with an unnamed public company that Fast Radius says has provided investors with a return and paid back their creditors.
Bad timing struck again when his suitor received an unsolicited takeover bid and withdrew his offer last week.
The company, which laid off 20% of its workforce on Nov. 3, plans to continue through the bankruptcy while it seeks a buyer. It has around $24 million in debt and $6.2 million in cash. It faces a potential liquidity crisis. In its bankruptcy filing, Fast Radius says its lenders deferred loan payments totaling $5.2 million in November and December.
With markets choppy and the Federal Reserve raising interest rates, capital is harder to come by and more expensive.
“We’re likely to see a wave of corporate failures due to the rising cost of corporate capital,” says Clint Francis, a law professor at Northwestern University who specializes in bankruptcy.